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U.S Employment Rose by 165k in April | Gold & Silver Are Falling

May 3, 2013

The U.S. employment rose by a higher than anticipated pace – based on ADP estimate, the non-farm payroll rose by 119k during April: According to the latest U.S. employment report, which was published today, May 3rd by the Bureau of Labor Statistics the number of non-farm employees rose by 165,000. The main sectors that grew during April were in professional and business services, retail trade, food services and drinking places, retail trade, and health care. The rate of unemployment inched down to 7.5%. Gold price is currently slightly falling while other commodities prices and the major stock markets are sharply rising.

The chart below presents the revised figures of the number of non-farm employees expanded in the labor market during the past few years (up to April 2013). The change in non-farm payroll was revised up for February from +268k to +332k; For March it was revised from +88k to +138k. The combined added jobs in those months were 470k – 114k more than previously reported. The revised figures for February and March suggest the employment situation in the U.S has improved in the previous months.

As I have examined in the past, the minimum number of non-farm payroll employment needed to maintain the rate of unemployment unchanged (to compensate with the growth of the U.S. civilian work force) is roughly 107k. So the sharp gain in employment was higher than this threshold.

The rate of U.S. unemployment inched down in April to 7.5%. The rate of unemployment is at its lowest since mid-2008 but hasn’t changed much since November 2012. The current unemployment rate is 0.6 percent points lower than its rate in April 2012.

Furthermore, the number of unemployed persons (11.7 million) was also little changed in April compared to the previous month.

Following this news, currently, the Euro/USD exchange rate is rising; crude oil price is sharply increasing; the U.S stock market indexes are also rising; gold price is slightly falling.

Now let’s breakdown how this news might affect the direction of commodities prices, including the prices of gold and crude oil:

Gold Market

As I have already pointed out in the latest gold and silver prices monthly outlook, historically, if the non-farm payrolls rise by more than the population growth rate (roughly 107k), gold price tended to decline; this correlation was mostly due to the effect this news has had on the speculation of the Fed intervening again the U.S financial and the progress of the U.S economy.

The table below shows the correlation between the news of the U.S. non-farm payroll employment changes and the daily changes in gold and silver prices on the day of the U.S. labor report publication. The table below presents the negative correlations between the U.S employment and daily changes of precious metals prices.

Crude Oil Market

The recent sharp rise in the non-farm employment is higher than many had anticipated; moreover, the employment grew by well above the 110k mark, which is a positive sign for the progress of the U.S. economy from the perspective of the U.S’s work force. This could suggest the price of oil may further rise.